A NSW Productivity Commission proposal would ban commissions paid to strata managers and replace them with a fee-for-service model to improve fairness, transparency, and potentially reduce costs for apartment owners.

Removing commissions is argued to boost transparency, promote competition, and deliver better value for money, with the potential to lower strata fees and premiums.

The NSW government says it will carefully consider the commission’s findings and recommendations.

Industry backing comes from the Strata Community Association for moving away from commissions, though some in the sector resist change, arguing commissions cover resource-intensive work.

Strata managers often receive commissions on services they arrange, such as insurance and energy; for example, a $50,000 insurance policy can generate about a $10,000 commission.

The report questions how managers are appointed (often by developers) and notes conflicts when defects arise, suggesting reforms to reduce such conflicts.

The report notes about a quarter of NSW residents live in residential strata schemes, with roughly half of Sydney homes projected to be strata by 2041.

While commissions are legal, they can inflate costs, obscure what owners are paying, and undermine trust between owners and managers.

A NSW Productivity and Equality Commission report links bans on commissions to aligned incentives for managers with both owners and renters, citing conflicts of interest and inflated costs.

Consultation drew more than 550 submissions, with strong support from apartment owners worried about rising costs, opaque pricing, and conflicts of interest; cases like that of Sydney owner Lui Timbano illustrate the difficulty of switching providers under commission structures.

Stakeholders, including David Glover of Owners Corporation Network Australia, support transparency and professional, fairly paid strata managers, criticizing commissions as hidden payments that drive more expensive contracts.

The commission received more than 550 submissions; a case study showed insurance commissions rising dramatically without corresponding work, while engaging an insurance broker reduced premiums by about 30%.